The Center for Medicare and Medicaid Services (CMS) has found a new way to monitor health insurance companies: secret shopping. In the spring of 2007, CMS initiated a secret shopper program that would secretly monitor the practices of various health plans offering Medicare Advantage and prescription drug plans. Contractors Booz Hamilton and Advanced Pharmacy Concepts, along with 30 CMS officials, secretly visited insurance marketing events in a number of different states. The initial trial went so well that CMS decided to continue the initiative through the fall of 2007.The main priority of the group was to attend the Private Fee-For-Service (PFFS) events, but they also shopped the events for the Regional Preferred Provider organizations, health maintenance organizations, special needs plans, and prescription drug plans.

Some of the most common violations cited in these secret audits were:

• Failure to clearly communicate provider participation or network restrictions

• Failure to include the PFFS marketing material disclaimer in the sales presentation

• Failure to include information in the enrollment application form, including a line item for the beneficiary’s verification phone number & a description of the enrollment verification process

• Misrepresentations of plan premiums, deductibles, and co-pays

After the fall session, CMS issued warning notices to all health organizations with at least one violation of the CMS marketing guidelines. During the spring session, CMS noticed positive changes in their secret audits. After the second session, CMS continued to send warning notices as necessary. Some companies were spoken with several times, yet still refused to comply. These companies were handled accordingly, with one PFFS plan placed on an enrollment and marketing freeze for a majority of the Annual Enrollment period, while two other plans were placed on corrective action plans. Overall, though, violations significantly decreased over the specified time period.

These two sessions were so successful that CMS decided to continue the secret shopping through the 2008 Open Enrollment period for Medicare Advantage. Although the data for 2008 is still being evaluated, it already suggests that monitoring continues to be necessary.

In addition to the secret shopping endeavor, the Center for Medicare and Medicaid Services plans to work closely with both States and their health plans to enforce the requirement that only State-licensed marketing representatives are allowed to conduct marketing activities. CMS will collaborate with the States to share compliance and oversight information about the performance of licensed insurance agents and brokers. Additionally, CMS has proposed a series of new marketing requirements, which they hope will further reduce marketing violations.

Since the 2008 session, the Medicare Improvements for Patients and Providers Act (MIPPA) has been passed. This Act established new statutory requirements that prohibit certain types of marketing activities for both Medicare Advantage and prescription drug plans. Those prohibitions include, but are not limited to:

• Cash inducements
• Unsolicited direct contact, including door-to-door solicitation and cold calling
• Cross-selling
• Free meals
• Marketing in areas where healthcare is delivered (hospitals, physician offices, etc…)

Check out the article on the Wall Street Journal, where they have posted the secret-shopper letter that CMS sent to Herb Kohl, the chair of the Senate Committee on Aging.